ACCOUNTING PRINCIPLES AND POLICIES
Income statement
Sodexo presents its income statement by function.
Operating profit comprises the following components:
- gross profit;
- Selling, General and Administrative costs (SG&A); and
- other operating income and expenses.
In order to better focus the Group’s financial communication on recurring operating profit and to simplify benchmarking with competitors, the consolidated income statement changed from Fiscal 2018 to include a new indicator, “Underlying operating profit”, which corresponds to operating profit before “Other operating income” and “Other operating expenses”.
Other operating income and expenses include the following:
- gains and losses arising from changes in the scope of consolidation;
- gains and losses arising from changes in post-employment benefit obligations;
- restructuring and rationalization costs;
- acquisition-related costs;
- amortization and impairment of purchased intangible assets (primarily client relationships and trademarks);
- goodwill impairment;
- impairment of non-current assets and other unusual or non-recurring items representing material amounts.
Underlying operating profit also comprises the Group’s share of profit of companies accounted for using the equity method that directly contribute to the Group’s business.
Underlying operating profit has replaced operating profit in the segment information, as it is now the main indicator reviewed regularly by the Executive Committee, which is the Group’s main operating decision-maker.
REVENUES
Revenues reported by Sodexo relate to the sale of services in connection with the ordinary activities of fully consolidated companies as follows:
- On-site Services: Revenues include all revenues stipulated in a contract, whether Sodexo acts as principal (the vast majority of cases) or agent.
Food services revenues are recognized when the consumer pays at the check-out (the date on which control of the goods is transferred to the consumer, since the sales do not represent any other unsatisfied performance obligation at that date). Facilities Management services mainly represent routine or recurring services, whose benefits are simultaneously received and consumed by clients as they are performed by the Group, and therefore correspond to performance obligations satisfied over time. Consequently, the Group applies the practical expedient provided for in IFRS 15 and recognizes the revenue for its right to bill (invoicing based on contractual prices, which represent the transaction prices of the different promised services).
As a result, revenue recognition matches with billing for most of the On-site Services.
Principal versus Agent considerations
When a third party is involved in providing goods or services to the customers (for example, a subcontractor), the Group evaluates whether or not it obtains control of goods or services before transferring control to the customer. When the Group controls the good or service before it is transferred to the customer, the revenue is recognized on a gross basis. Otherwise, when the control is not obtained, the Group considers not to be acting as principal in the transaction and the revenue is recognized on a net basis;
